CHAPTER 14

Capitalism And The Economy

Chapter Study Outline
CREATIVE CLASS

The creative class is a category of workers in multiple occupations and industries united by the fact that
creativity is central to their productive work. It is in high demand by companies and, as an extension, by cities
and towns, which go to great efforts to attract them.

American workers are more productive than ever, yet job insecurity is high. As a result, many people are working
longer hours, especially people at higher income levels, in order to prove loyalty or achieve marginal benefits.

A BRIEF HISTORY OF CAPITALISM

The feudal system, which preceded capitalism in Europe, began to change as early as the fifteenth century with
the enclosure movement, which forced people off what had been public land and sent them looking for work
in cities.

Beginning in the eighteenth century, new farming technologies led to an agricultural revolution that helped
increase the population and the value of land, and innovations in manufacturing and transportation
technology created a demand for this larger labor pool to fill new jobs.

Also connected to industrialization was the transition from barter to the use of a legal currency to buy and sell
goods and from agreements between individuals to contracts between corporations.

THEORIZING THE TRANSITION TO CAPITALISM

Adam Smith argued that competition, driven by peoples inherent self-interest and drive to trade, helps
maintain a cohesive society. He also stated that specialization is a key to increased productivity and innovation,
and that the use of money, as opposed to barter, makes trading more efficient.

Georg Simmel saw the evolution of monetary payment systemsfrom piecework payment to wage labor to
salaried workas a force to depersonalize exchange. Moreover, he felt this was a positive change that helped
create separate public and private spheres and gave workers more freedom to enjoy the private, or leisure,
sphere.

Karl Marx argued that capitalism created alienation in workersalienation from the products they produced,
alienation from the production process, alienation from one another, and alienation from themselves and their
creative tendencies. Marx predicted both that capitalism would ultimately destroy itself and that the working
class would rise against the capitalist class, leading to a period first of socialism and then communism.

Max Weber linked the rise of capitalism to technology and ideas, specifically ideas and beliefs connected to the
Protestant Reformation. Weber ultimately saw capitalism in a negative light, not because he thought it caused
alienation as Marx did, but because he thought people became obsessed with working and making money that
they could never enjoy.

RECENT CHANGES IN CAPITALISM

The Ford Motor Companys idea of the family wage was based on a very limited definition of family. It favored
married men with children over single men or married men without children, and it reinforced the notion that
women should not work.

The fact that women have often been paid less than men has served to deter them from seeing work as a lifelong
choice. The wage structure was one factor that made women see marriage as the only way to have financial
security.

Compared to people in many other industrialized countries and some developing countries, Americans work
longer hours and have fewer vacation benefits and less generous family-leave policies.

While more American companies are offering family-friendly policies such as flextime and flexspace,
employees are not necessarily taking advantage of them in great numbers.

Studies show that working mothers are less depressed and have higher self-esteem than mothers who do not
work, yet they are also more likely to feel tired and anxious and to have higher divorce rates.

While globalization is not a new phenomenon, the current period of globalization has a number of new elements,
and it has clearly demarcated the division between the worlds rich and poor. The question is whether
globalization can truly be a force to close that gap or if it serves only to widen it.

THE REIGN OF THE CORPORATION

A corporation is a juristic personan entity that has all the legal rights, duties, and responsibilities of a
personand corporations structure economic life around the world.

THE CORPORATE PSYCHOPATH

The overriding objective of corporations is to make profits for their shareholders, and in order to do this they
must find ways to beat the competition. Sometimes these efforts lead corporations to cross the line of legality or
at least to come close to crossing it.

There is constant tension for corporations in terms of pressures to be profitable and pressures to be
environmentally responsible, which can add to overall costs..

Employees also exert pressure on corporations, in the form of asking for better wages, benefits, and working
conditions, all of which add to a corporations costs and make it less profitable. But not providing these things
may also have a negative cost in terms of loss of workers, strikes, or lower productivity. When workers formally
come together in order to make such demands as a group, they have formed a union. There has been a
significant decline in unionization rates in the United States since the 1970s.

There has been a lot of concern in the United States about job loss due to offshoring (when a company moves
operations overseas to cut costs) and due to the presence of illegal immigrants, who are often paid less than a
U.S. citizen would be. Some people argue that illegal immigrants have an important role in the economy, not
taking jobs from Americans but rather doing jobs that Americans wont do. Others argue that illegal immigrants
are ultimately a drain on social services and should be deported with no option for getting legal working papers
or citizenship.